The Life of a Working Mother. Being a mother is the most wonderful thing that has ever happened to me. Journey with me as I find the strength, inspiration and vision within myself.

Wednesday, March 28, 2012

What to look out for when buying a property

With so much hype about the Singapore property market, I will like to share with my readers on what to look out for in buying a property. I will like to add a logical dimension when one decides to sign the dotted line.

Why is property investment an attractive proposition?

Singapore is an attractive place for foreigners to buy property for investment. One key reason is that there is currently no capital gain tax (CGT)*. However, Singapore used to have CGT on gains which individuals made from selling properties within three years of purchase in 1996 as a measure to curb speculation in the property market then. The government lifted the rule in 2001.

Another reason that adds to the attractiveness of Singapore is the political stability and legal protection a buyer would enjoy when he purchases a property here.

From wikipedia: "CGT is a tax charged on capital gains, the profit realized on the sale of a non-inventory asset that was purchased at a lower price. The most common capital gains are realized from the sale of stocks, bonds, precious metals and property. Not all countries implement a capital gains tax and most have different rates of taxation for individuals and corporations."

In general, people are also drawn to property purchase as they could have passive income through rental. In addition, they could also leave behind the property as a legacy to their children.

In terms of the amount of money to fork out, it is typically around 20% of the purchase price for the downpayment. Buyers will have to take a loan from financial institution to finance up to 80% of the purchase price with effect from 17 Feb 2010 as the government limits the LTV ratio to 80% (i.e. Loan-to-value from 90% to 80%). They would need to cough out more if the bank decides to offer a lesser loan. As a rule of thumb, a buyer should ensure that his debt-to-service ratio (DSR) is 35% or lower.